Buyer's Credit is a credit extended by a bank in India to an overseas buyer enabling the buyer to pay for machinery and equipment that he may be importing from India for a specific project.
A Line of Credit is a credit extended by a bank in India to an overseas bank, institution or government for the purpose of facilitating import

of a variety of listed goods from India into the overseas country. A number of importers in the overseas country may be importing the goods under one Line of Credit.

ECGC has evolved schemes to protect the lending banks from certain risks of non-payment. These covers take the form of an agreement between the lending bank and ECGC and are issued on a case to case basis. Credit terms and the length of the credit period should be in conformity with what is appropriate for the export of the relevant items. There should be adequate security for the repayments to be made by the borrower.

Cover can be granted either for political risks or for comprehensive risks. Political risks covered under the scheme are:

The occurrence of war between the country of the overseas party and India.

The occurrence of war, hostilities, civil war, revolution, rebellion, insurrection or other disturbances in the country of overseas party.

The operation of law or of an order, decree or regulation having the force of law which in circumstances outside the control of the lender and/or the overseas party, prevents, restricts or controls, the transfer of the sums due to the lender by the overseas party under the Financial Agreement.

If ECGC agrees to provide comprehensive risks cover, the risk of protracted default of the borrower to pay the amounts due under the loan agreement and insolvency of the borrower, where applicable, will be covered in addition to the political risks mentioned above. The premium rates applicable to comprehensive risk cover will naturally be higher than that for political risks cover. Normally ECGC covers up to 85% of the loss.

The premium rates depends on the country to which exports are made and the period of repayment.

When is the premium to be paid for the cover for Buyer's Credit and Line of Credit?

At least 20% of the total amount of premium should be paid in advance. The balance amount of premium may be paid on a quarterly basis in proportion to the amount of credit disbursed.

To download the proposal form for a Insurance Cover for Buyer's Credit And Line of Credit,click here.
For any further clarification on the scheme, click here.